Sunday, December 25, 2011

2. You are often confident that something is true long before you have an airtight proof for it.

3. You are comfortable with feeling like you have no deep understanding of the problem you are studying.

4. Your intuitive thinking about a problem is productive and usefully structured, wasting little time on being aimlessly puzzled.

5. When trying to understand a new thing, you automatically focus on very simple examples that are easy to think about, and then you leverage intuition about the examples into more impressive insights.

6. You go up in abstraction, "higher and higher". The main object of study yesterday becomes just an example or a tiny part of what you are considering today.

7. The particularly "abstract" or "technical" parts of many other subjects seem quite accessible because they boil down to maths you already know. You generally feel confident about your ability to learn most quantitative ideas and techniques.

8. The particularly "abstract" or "technical" parts of many other subjects seem quite accessible because they boil down to maths you already know. You generally feel confident about your ability to learn most quantitative ideas and techniques.

9. Spoiled by the power of your best tools, you tend to shy away from messy calculations or long, case-by-case arguments unless they are absolutely unavoidable.

10. You develop a strong aesthetic preference for powerful and general ideas that connect hundreds of difficult questions, as opposed to resolutions of particular puzzles.

11. Understanding something abstract or proving that something is true becomes a task a lot like building something.

12. You are good at generating your own questions and your own clues in thinking about some new kind of abstraction.

13. You are easily annoyed by imprecision in talking about the quantitative or logical.

14. On the other hand, you are very comfortable with intentional imprecision or "hand waving" in areas you know, because you know how to fill in the details.

15. You are humble about your knowledge because you are aware of how weak maths is, and you are comfortable with the fact that you can say nothing intelligent about most problems.

Saturday, December 24, 2011

(Reuters) - Only four years ago, hundreds of start-ups optimistically built factories and churned out solar panels to meet rising demand. Now, closures and failure loom for many.

The brutal shakeout is a dramatic reversal for an industry that has seen overall global growth of more than 30 percent annually over the past decade and this year will reach new records for solar panel sales.

Only a handful of manufacturers are now profitable in the face of too much capacity, which has contributed to a plunge in prices, and as government subsidies have been curbed. European banks that lent billions for solar installation have also pulled back as they struggle in the euro zone credit crisis, and debt-laden Chinese solar companies are in danger of burning up.

Solar profit margins that often approached 50 percent in 2007 have in many cases disappeared altogether. The pain - namely bankruptcy for some key players in the sector - may get much worse before it begins to ease.

"When you look at some of those balance sheets and how levered those companies are, and you look at how thin their profit margins are, it can really make your hair stand on end," said Kevin Landis, portfolio manager of the Firsthand Alternative Energy Fund, whose top holdings include Swiss solar equipment maker Meyer Burger Technology AG and U.S. equipment maker GT Advanced Technologies Inc.

And while sliding prices are making solar more competitive, the prospect of new cheap supplies of natural gas around the world is undermining those gains.

The continuing shakeout is seeing many of the early entrants to the solar industry either fail or sell out. A whole new breed of big investors, such as Warren Buffett and Google Inc, or oil industry companies such as TransCanada Corp, are moving into solar power production. Some, including oil giant Total, have even entered the tumultuous panel manufacturing market. Its rival BP Plc, however, said this week it was exiting the solar business entirely.

Asian conglomerates that already have solar panel manufacturing operations, such as Japan's Sharp Corp or South Korea's LG Corp, could scoop up their smaller, struggling rivals, or simply allow them to fold and benefit from reduced capacity.

The rapid march down in prices and the Darwinian survival of only the fittest - without the aid of large government subsidies - is making solar power more competitive against conventional energy sources, such as oil, coal and nuclear power. That means that for homeowners, businesses and utilities, the choice to go solar is more attractive and attainable than ever.

GLOBAL GLUT

Still, even the most efficient manufacturers are troubled. First Solar, the U.S.-based low-cost leader, last week announced job cuts, saying 2012 profits would be up to 50 percent below Wall Street forecasts. A week earlier, another big U.S. solar company, MEMC Electronic Materials Inc, said it would cut a fifth of its staff and idle some facilities.

At the heart of the downturn is a massive global glut of panels and huge excess production capacity that has driven prices down more than 40 percent in 2011.

"The prices that we're seeing today are likely not covering manufacturing costs in many cases," said Ralph Romero, director in management consulting for Black & Veatch, which provides engineering and due diligence consulting services to solar manufacturers.

The pain for the solar manufacturers has been acute, with most shares in the sector dropping more than 60 percent. First Solar, a one-time Wall Street darling, is the worst-performing stock in the Standard & Poor's 500 index this year, down more than 73 percent.

A number of companies have already lost their fight for survival, such as Germany's Solon SE and Solar Millennium, which both sank into insolvency this month. That follows U.S. companies Evergreen Solar, SpectraWatt and Solyndra, the last of which shut down operations in September despite its controversial gobbling up of more than $500 million of U.S. government support.

Even China's notoriously aggressive small, private manufacturers are closing factories. In fact, experts predict much of an estimated 49.8 gigawatts of global solar cell production will have to be shuttered so that companies can profitably meet expectations of far lower global demand.

A GLOOMY OUTLOOK

Prices for solar panels started 2011 near $1.60 per watt, but a buildup of inventory forced manufacturers into a fire sale toward the end of the second quarter that has pushed prices to near $1 per watt now. Romero said prices for polysilicon panels, the dominant technology, may stabilize around that level, though others see declines continuing well into next year.

SolarCity, one of the largest U.S. solar installers, is anticipating a further slide early in 2012. "I do think 85 cents is probably close to the floor," said Lyndon Rive, its CEO.

That price could spell difficulties for some major names, including U.S.-listed Chinese companies Suntech Power Holdings , which has the biggest capacity for making panels in the world, and LDK Solar Co , one of the largest makers of polysilicon wafers used to make panels, industry analysts and investors say.

LDK did not respond to questions about its financial health. A spokesman for Suntech emphasized the company had cemented its position as the largest supplier of panels globally, and that it is increasing its market share.

Like other China-based companies, Suntech and LDK won massive credit lines from state-backed banks. Two years ago, that was seen by many in the industry as an unfair handout that allowed them to outflank rivals in Germany or the U.S.

But now that debt, about $2.2 billion for Suntech and $3.6 billion for LDK, is proving a huge burden.
"Maybe because (LDK) are so big they get some kind of sweetheart debt deal that prevents the company from going under, but I would find it really hard to believe that the current equity holders are going to be spared," said Morningstar solar industry analyst Stephen Simko, who added that Suntech also looks particularly vulnerable.

LDK's debt has swelled $800 million in the past 12 months to almost three times its net asset value, and analysts see it showing negative free cash flow of about $1.1 billion this year and $375 million in 2012, Thomson Reuters I/B/E/S data show.

On the same basis, Suntech negative free cash flow is likely to approach $800 million this year, and $200 million in 2012.

Concerns are also swirling in the debt markets, where LDK's 4.75-percent bonds due in April of 2013 are priced at around 68 cents on the dollar, according to Thomson Reuters data. Markit data, however, shows that issue priced at 47 cents to 51 cents on the dollar. Suntech's debt that matures in March of 2013 is priced at 41 to 42 cents on the dollar, according to Thomson Reuters and Markit.

"We exceeded both our shipment and gross margin guidance for the third quarter and ended the quarter with over $560 million of cash and restricted cash," Rory Macpherson, Suntech's director of investor relations, said in an email.

"We are also implementing a range of initiatives that will strengthen our financial position over the next 12 months. These include accelerating cost-down programs, improving working capital by $200 million by the end of the year, reducing operating expenses by 20 percent in 2012, limiting capital expenditures to maintenance only, and monetizing non-core assets."

THE GAS THREAT

First Solar's projects have drawn the interest of large corporate partners such as U.S. utilities MidAmerican and NRG in part because the company's panels are the cheapest - making them ideal for large projects. First Solar makes panels from cadmium telluride rather than pricey polysilicon, the key component for more than 80 percent of global supply.

First Solar has said its costs are expected to drop more than 10 percent to 65 cents per watt by the end of next year, excluding the costs of running production below capacity.
That might be just enough to allow it to sell its panels at a discount to its polysilicon-based rivals - a discount it needs because its panels are not typically as efficient at turning sunlight into electricity, a fact acknowledged by both the company and industry experts alike.

Only three others, China's Yingli Green Energy Holding, Trina Solar Ltd and Jinko Solar Holding Co, are expected to get costs low enough to sell profitably at 85 cents per watt next year.

Recognizing the darkening market economics, First Solar's CEO Mike Ahearn has said the company will shift sales away from Europe, a market that had been supported by subsidies.

Germany, the world's top solar market, has gradually been ratcheting down its solar subsidy, while other large markets such as Spain, Italy and the Czech Republic dramatically cut back subsidies that had led to a boom in demand.
First Solar plans to get more power out of each panel and cut building costs for solar power plants to get the cost of electricity production down to $100 to $140 per megawatt hour in the next three years. That would be less than half the price a year ago and near the $90 per megawatt hour cost of a new nuclear plant.

However, it has a long way to go still to be competitive against other energy sources - it would still be nearly double the cost of a coal-fired power plant and triple that of natural gas plants, according to U.S. Department of Energy data.

And those natural gas plants represent one of the biggest threats to solar power in the United States, since the advent of hydraulic fracturing drilling technology has opened up decades' worth of gas supply. Utilities are rushing to build new gas-fired plants that can produce electricity cheaply.

Even with an 85-cent per watt price in sight for some, the industry will still need government support. And that backing will be available in fewer places and often under less generous terms.

"Without subsidies solar PV is still not in a position to be competitive across the board," Romero said.
Solar is competitive today in some places where power prices are very high, Romero said, such as California. That, as well as the state's mandate that it source one third of its electricity generation from renewable sources by 2020, has led to a boom in the building of solar projects there.

But the trend is "on the down slope" now as the state has fulfilled much of its requirement, said Ahearn. That's another reason First Solar and others are looking at new markets.

EMERGING MARKETS

First Solar is betting that its 2015 cost will be low enough to drive business in India, and some other markets, to win new contracts that need no government subsidy.

It is not alone in trying to break into such markets. Suntech, Yingli and Trina have all said they would target places like India. The only problem is that it will take several years at least to develop enough business to be profitable in those markets and competition could be intense.

"Over 95 percent of historical demand for PV has come from subsidy-driven markets, principally in Europe. The strategy of shifting focus to frontier markets makes sense in the long run but demand there is quite limited for the time being," Raymond James analyst Pavel Molchanov said.

The new, promising solar markets most often cited by manufacturers include India, Southeast Asia and South Africa. Such markets not only enjoy abundant sunlight, which makes the economics of solar more attractive, they also have strong appetites for new sources of power and in many locations lack the grid infrastructure needed to build large power plants. That's another advantage for solar, which can be deployed on a small scale without the need for new transmission.

Also, in many emerging markets such as India, the use of diesel generators keeps electricity prices high - making solar more competitive.

"The economics in a lot of emerging markets makes solar very attractive without needing the incentives we have in the U.S. because of the cost of power in those countries and because solar eliminates the need for transmission," said Marty Klepper, co-head of the energy and infrastructure projects practice at Skadden, Arps, Slate, Meagher & Flom LLP.

The Indian government has a goal of generating 20 GW of electricity from grid-connected solar energy and 2 GW of off-grid solar by 2022 against just 54 MW installed at the end of 2010. India recently lowered its forecast for when solar would be competitive with grid electricity by five years to 2017.

In the U.S. though, conditions are worsening - and not just because of the threat of a cheap gas supply.
The industry is decrying the expiration at the end of this month of a program that allows solar project owners to recover 30 percent of the cost of construction in the form of a cash grant. The program will revert to a tax credit next year, making it useful only to those seeking to reduce their tax bill.

"Projects that have yet to commence construction are all at risk," said Darren Van't Hof, director of renewable energy investments for U.S. Bank, a unit of U.S. Bancorp. "Investors without a tax appetite are going to be challenged to stay in the market."

The chances that Congress will renew the cash grant program have dimmed, and that could hit demand immediately.

"We're projecting a big upswing in our business next year and I don't know if we'll get that if this goes away," said Tony Clifford, CEO of U.S. project developer Standard Solar.

NEW INVESTORS

One of the few bright spots is that despite the headwinds, there is new investment coming into solar power production.

Most recently, Warren Buffett offered the industry a major vote of confidence when his MidAmerican Energy Holdings bought First Solar's $2 billion Topaz Solar Farm, which at 550-megawatts is one of the two largest being built in the world. MidAmerican bought 49 percent of another First Solar project a week later, a move it said was part of a strategy to "aggressively" pursue opportunities in renewable energy.

Other big names, such as Bank of America and utility giants Exelon and NextEra, have also been investing in solar power projects. Bank of America has put its heft behind a plan to build more than $1 billion in solar projects on military housing with SolarCity, while Exelon and NextEra have each bought major First Solar projects.

Google has been an investor for several years and on Tuesday made its latest move, saying it would team up with private equity firm KKR to buy four California plants.

Winners are expected eventually to emerge but the question is how much more carnage there will be before that happens. "There is going to continue to be this natural rate of attrition where smaller companies sort of die off and the big companies who have been looking at the market and moving in will continue to make a bigger impact," said Firsthand's Landis.

Saturday, December 17, 2011

LONDON (Reuters) - Watching your favorite football team trying to hang on to a precarious lead in the dying minutes of a match is enough to frazzle anyone's nerves, but for one Manchester United fan the stress was nearly too much.

The 58-year-old woman gets so anxious she has to take treatment for a life-threatening condition brought on by watching knife-edge games at the Old Trafford stadium.

The condition, known as an Addisonian crisis, comes about when the adrenal glands do not produce enough of the stress-reducing hormone cortisol, a lack of which can lead to low blood pressure and even a coma.

"We believe that our patient was having difficulty mounting an appropriate physiological cortisol response during the big games and therefore we present this as the first description of Manchester United-induced Addisonian crisis," said Dr Akbar Choudhry who treated the patient.

Doctors suspected the condition when the woman started getting bouts of anxiety, palpitations, panic, light headedness, and a sense of impending doom towards the end of matches.

The symptoms were less serious when the home side was playing a lower-rated team.

An Addisonian crisis, which is a manifestation of Addison's disease, is difficult to diagnose because the main symptoms include fatigue, lethargy and low mood -- often experienced by otherwise healthy people and frequently reported in many other chronic conditions.

"Luckily, the patient was on holiday for United's 6-1 defeat by local rivals Manchester City in October," Choudhry said in a report on BMJ.com.

"But, by this time, doctors had fine-tuned her therapy and she has remained symptom-free during recent tense contests against Sunderland and FC Basel," he added.

Treatment coincided with the start of the 2011/12 football season and the patient has managed to attend all games at Old Trafford without any adverse effects.

National home sales figures will be lowered dating back to 2007 after the private trade group that collects them said the numbers were too high.

The National Association of Realtors said Monday it will release the downward revisions for previously occupied homes on Dec. 21.

The Realtors consulted with several government and private housing market experts, including the Federal Reserve, the Department of Housing and Urban Development, the Mortgage Bankers Association, the National Association of Home Builders, mortgage giants Fannie Mae and Freddie Mac and CoreLogic, the California-based data firm that first raised doubts about the annual numbers earlier this year.

CoreLogic estimated that the Realtors group overstated sales in 2010 by at least 15%.

Among the reasons for the inflated figures, the Realtors group says: changes in the way the Census Bureau collects data, population shifts and some sales being counted twice. Last year's total sales figure of 4.91 million was the worst in 13 years.

The changing numbers could impact how economists view data from the trade group. It could also affect companies who use the figures for hiring and expansion plans.

Thursday, December 1, 2011

A London bakery recently experienced the worst-case scenario of offering a Groupon for a small business, and it cost the owner thousands.

Need a Cake bakery owner Rachel Brown decided to put up a 75% discount on a dozen cupcakes on the site, which dropped the price down to $10 from $40.

Apparently, people really love getting cupcakes cheap, because she was rushed by throngs of customers in a cupcake frenzy. 8,500 people signed up, and her crew of eight had to make 102,000 cupcakes to meet the orders.

Brown lost $3 per batch because she had to hire 25 extra workers to help, and she ended up losing $20,000 because of it, which is a ton for a small biz. It wiped out her profits for the year, reports the Daily Mail.

"Without doubt, it was my worst ever business decision," she told the BBC. "We had thousands of orders pouring in that really we hadn't expected to have. A much larger company would have difficulty coping."

This is just the latest in Groupon small business horror stories. A story popped up in September about a Portland cafe losing $8,000 because of a Groupon, which prompted a personal letter from founder and CEO Andrew Mason.

It brings up the always-present question about the daily deals site: does Groupon suck for small businesses?

Well, it looks like most small businesses think so. An overwhelming majority of 70% hate Groupon, if the latest survey from iContact is to be believed.

As for Brown and her bakery, the experience may have cost her 20 grand, but what about all the exposure she's getting for her store? Great, right? It doesn't hurt, but it probably wasn't worth the cost.

Small businesses like this bakery thrive on relationships with their local customers, not crowds of outsiders coming in to snatch up a free lunch.

Getting new customers is great, but in this case, the bakery rewarded the wrong customers. Those 8,500 people that rushed for the Groupon probably won't be coming back to pay for the same cupcakes at quadruple the price.

Only those the store has nurtured relationships with for a long time (in Brown's case, 25 years), should be the ones rewarded. They're the ones that keep coming back for more.